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Mr. Chas. M. Rogers, Chairman,Board of Trustees TeacherRetirement System of Texas Austin, Texas Opinion No. (WW-24)
Re: Whether funds of the Teacher Retirement System of Texas may be invested in Corporate Dear Sir: Stocks and Bonds.

Your request, dated February 11, 1957, presents in substance the followingquestion:

'May the Board of Trustees of the Teacher Retirement System of Texas invest funds of the System in corporate stocks and bonds?" Section 48a,Article III, of the Constitution of Texas, as amended by the ConstitutionalAmendment adopted at the General Election held November 6, 1956, In providing for the investment of Retirement System funds, reads in part as follows:

"Section48a.

. . . "TheLegislaturemay authorize all moneys coming into such fund to be invested

. . .; or in such other securitiesas are now or hereafter may be permittedby law as investments for the PermanentUniversity Fund or for t\e Permanent School Fund of this State;
. . . Section 13, of Article 2922-1,Vernon's Civil Statutes, provides in part:

'Sec. 13. 1.

. . .All retirement funds and monies, including those received into the Treasury of the State of Texas as depositsand contributionsof teachersand employers,may be invested only

. . .;and- -___

Mr. Chas. M. Rogers, page 2. (WI?-24)

in securities inwhich the State Permanent School Fund of Texas or the PermanentUniversity Fund of the University of Texas may be Investedunder present or hereafter enacted laws."
From a reading of the foregoing constitutionaland statutoryprovisions, Itwill be seen that all retirement funds, therein specified,may be investedby the Board of Trustees of the TeacherRetirement System in certain designatedbonds and other evidencesof indebtedness "and in securities Inwhich the State Permanent School Fund of Texas or the PermanentUniversity Fund of the Universityof Texas may be investedunder present or hereinafter enacted laws." (Emphasisadded)

We find no authority for funds of the State Permanent School Fund to be invested in corporatebonds and stocks. Section lla of ArticleVII, of the State Constitution,adopted at the General Election held November 6, 1956, provides for the investmentof the PermanentUniversity Fund and reads,in part, as follows:"Section lla. In addition to the bonds now

enumerated in Section 11 of Article VII of the Constitution of the State of Texas, the Permanent University Fund may be invested in

. . . such corporationbonds, preferred stocksand common stocks as the Board of Regents of The University of Texas may deem to be proper Investments for said funds; and the interestand dividendsaccruing from the securities listed in Section 11 and Section lla, except the portion thereofwhich is appropriated by the operation of Section 18 of ArticleVII for the payment of principaland interest on bonds or notes issued thereunder, shall be subject to appropriationby the Legislature to accomplish the purposes declared in Section 10 of ArticleVII of this Constitution. In making each and all of such investmentssaid Board of Regents shall exercise the judgmentand care under the circumstances then prevailingwhich men of ordinary prudence,discretion, and intelligenceexercise in the management of theirown affairs not in regard to speculation but In regard to the permanent dispositionof their funds, consideringthe probable income therefrom as well as the probable safety of their capital; provided,however, that not more than fifty per cent (50%)of said fund shall be investedat anyMr. Chas. M.Rogers, page 3. (Ww-24)

given time in corporate stocks and bonds, nor shall more than one per cent (1%) of said fund be invested in securities issuedby any one (I) car oration, (5J nor shallmore than five Per cent of the voting stock of any one (1 corporation be owned; and provided, further, that stocks eligible for purchase shall be restricted to stocks of companies incorporatedwithin the United States which have paid dividends for ten (10)consecutive years or longer Immediatelyprior to the date of purchase andwhich, except for bank stocks and insurance stocks, are listed upon an exchange registeredwith the Securities and Exchange Commission or its successors. . . .II The provisionsof Section lla, for purposes of this opinion, are self-explanatory.

We conclude that the Board of Trustees of the Teacher Retirement System may Invest funds of the System in those corporate stocks and bonds inwhich funds of the PermanentUniversity Fund of the University of Texas may be invested,pursuant to the provisions of Section lla of Article III of the Constltution of the State of Texas, and subject to the applicable condltions and limitations set forth therein.
SUMMARY The Board of Trustees of the TeacherRetirement System may invest funds of the System in those corporate stocks and bonds %nwhich funds of the PermanentUniversity Fund of the University of Texas may be invested, pursuant to the provisionsof Section lla of Article III of the Constitution of the State of Texas, and subject to the applicable conditionsand limitations set forth therein. Very truly yours,

LP:F:st
APPROVED: OPINION COMMITTEE H. Grady Chandler Chairman WILL WILSON Attorney General of Texas

-LEdRARD PASSMORE Assistant